New Deal for Business Non-Domestic Rates Sub-Group minutes: 13 June 2023

Attendees and apologies

• Liz Cameron, Scottish Chambers of Commerce (Business Lead)
• Fiona Campbell, Association of Scotland’s Self-Caterers
• Martin Clarkson, Gerald Eve
• Stacey Dingwall, Federation of Small Businesses Scotland
• Jim Doig, Scottish Assessors Association
• Heather Honeyman, Scottish Assessors Association
• Mirren Kelly, Convention of Scottish Local Authorities (COSLA)
• David Lonsdale, Scottish Retail Consortium
• David Melhuish, Scottish Property Federation
• Stephen Montgomery, Scottish Hospitality Group
• Alan Puckrin, Local Authority Directors of Finance
• Les Robertson, Institute of Revenues, Rating and Valuation
• Brian Rogan, CBRE
• Leon Thompson, UK Hospitality Scotland
• Paul Togneri, Scottish Beer and Pub Association
• Pete Wildman, Scottish Assessors Association
• Colin Wilkinson, Scottish Licensed Trade Association

Scottish Government

• Tom Arthur, Minister for Community Wealth and Public Finance (Chair)
• Ellen Leaver, Deputy Director, Local Government and Analytical Services Division
• Scottish Government Officials

Apologies

• Marc Crothall, Scottish Tourism Alliance

Items and actions

Welcome

The Minister welcomed members to the meeting and apologies were noted as above.

Minutes of last meeting

The minutes of the previous meeting held on 6 June 2023 were agreed and accepted as an accurate record.

NDR tax rates and reliefs

The Minister noted previous comments on the non-domestic tax rates and reliefs, particularly at the first meeting of the group. He noted that non-domestic rates (NDR) are a key component of local government funding and are used to support the delivery of the public services on which we all rely; and that assuming government expenditure is to remain the same, any reduction in NDR income would have to be made up in some other way. Therefore NDR needs to be considered as one element of the basket of taxes and suggested these discussions should be taken forward in the Tax Advisory Group which will be established by the Deputy First Minister over summer. He added that nevertheless, this meeting offers an opportunity to discuss redistribution of the rates burden within the NDR system.

Liz Cameron stated that the Scottish Chambers of Commerce would like more time to consider various options for redistribution with their membership. This was also echoed by Stephen Montgomery and Brian Rogan.

Fiona Campbell noted the previous evaluation of the Small Business Bonus Scheme (SBBS) undertaken by the Fraser of Allander Institute. She advised that 80% of the self-catering sector rely on SBBS and that as a result of increased rateable values at revaluation and a decrease in the threshold for SBBS relief, many of her members had fallen out of eligibility for the relief.

Stacey Dingwall advised that SBBS was important for Federation of Small Businesses (FSB) members as well and that FSB would wish to see this maintained for as many ratepayers as possible; they would be reluctant to see further reform of SBBS at this time. She advised it would be important to monitor how the relief impacts the economic outlook for small businesses. She noted the Small Business Transitional Relief (SBTR) introduced this year so that ratepayers falling out of SBBS eligibility do not see a “cliff-edge” increase in their rates liability. Les Robertson also noted the SBTR and advised that some local authorities had not yet had software updates to allow them to bill ratepayers properly, including for SBTR.

Stephen Montgomery advised that turnover vs ability to pay is an issue for the hospitality sector due to the way it is valued. Mirren Kelly also asked whether SBBS not reflecting the profitability of a business should be considered. Stephen stated that SBBS needs to be an incentive for businesses to grow as well, rather than businesses facing increased bills after expanding to new premises and losing eligibility.

Colin Wilkinson noted that businesses in the retail, hospitality, and leisure sectors in England were eligible for 75% relief this year and asked whether this could be considered in Scotland. The Minister advised that the Scottish Government does not have the power to vary rates after the financial year had started and that the budget was fully committed for this year. The Minister further advised that future decisions on non-domestic rates would be considered as part of the Scottish Budget.

David Melhuish suggested that further progressivity could be introduced to the poundage. Paul Togneri also supported this idea, noting that the Scottish Beer and Pub Association had been calling for a 35p poundage for hospitality for some time. Paul stated that in his view a property tax in an increasingly digital world is not fit for purpose and that he would support this being redesigned. He noted that there would be winners and losers from any reform and that this should be considered in longer-term discussions, however anything to lower the rates burden on the hospitality sector would be welcomed.

David Lonsdale advised that as a result of this sub-group, he would like to see Scottish Government maintain its commitment on the Higher Property Rate, to restate support for a uniform business rate and for a moratorium on new or ad hoc levies for businesses. He stated that the Barclay Review of Non-Domestic Rates noted that the shock related to any potential alternatives to non-domestic rates would need to be factored into considerations.

Brian Rogan noted that the annexes of the Barclay Review could pave the way forward for what reform of non-domestic rates could look like. He also noted a suggestion for reform to SBBS where “everyone should pay something” to build the link between businesses and the public services which are funded by non-domestic rates. He advised the group of international examples of annual revaluations cycles, such as in Hong Kong. He also noted that annual revaluations would reduce the need for transitional relief schemes.

Les Robertson noted that due to SBBS, when the COVID-19 business support grant scheme were being administered, they found that the council held incorrect or incomplete information on a large number of properties as there was little no incentive to advise the council of a change in tenancy. He did also note however that it could be administratively costly to charge ratepayers for small amounts.

SG officials noted that in theory more proportionality could be introduced to the non-domestic poundage and supplements. She also advised that better information exchange would be required for annual revaluations. She noted the Bill currently being considered by the UK Parliament which would place a duty on ratepayers in England to provide information on their property to the Valuation Office Agency and asked for the group’s views on this. Brian Rogan noted that some of his clients have already agreed to return information annually to the Scottish Assessors. 

Liz Cameron stated that annual revaluations would increase the number of appeals and this would have additional resource implications for assessors; and that annual revaluations may come with short-medium term issues but could be worth considering in the long run. She noted that if assessors are not provided with information on properties, then rateable values are determined based on judgement calls. She stated that if there was an incentive for landlords to provide information on an annual basis, this could help with more accurate valuations and may be worth exploring further.

Stephen Montgomery stated that if any reform of NDR was carried out, there would be less need for appeals and therefore less of a burden on assessors’ resources. He stated that it is important that this suggestion be framed appropriately so that everyone can see the tangible benefits of it.

The Minister noted the calls for further time to engage on non-domestic rates, and advised that this would be looked at.

Consistency and efficiency of NDR system

The Minister noted that at the last meeting, Liz Cameron and the Scottish Assessors Association had agreed to discuss a paper setting out ideas for further improvements to the non-domestic rates system which had been shared with the group ahead of this meeting.

Liz Cameron advised the group that a productive and constructive discussion had taken place with assessors prior to the meeting. Heather Honeyman noted the discussion had highlighted the various ways in which assessors put information into the public domain, including through the Scottish Assessors Association Portal. Heather Honeyman noted that the paper was very high level due to the short timeframe available, and should be considered against the background of recent reforms to the NDR system which are still being embedded.

Pete Wildman reiterated that we are at an early stage of the Barclay reforms, and that more fundamental review should only be considered later, once the reforms from the Barclay Review have been fully implemented and there has been an opportunity to evaluate. He noted that further discussion could take place on how the exchange of information to and from assessors could be more efficient, and cited an example of discussions with the Association of Scotland’s Self-Caterers to allow for online returns of information.

Alan Puckrin noted the concern from businesses regarding the delays in billing software updates this year and advised that one potential area for reform could be for a national billing system, noting that current billing systems were many years old. He stated that there should be a balance between local decision-making and the need for consistency in the administration of NDR. He also noted an example of the Northern Ireland Executive’s valuation system as one which could be looked at. Mirren Kelly advised that COSLA would be happy to discuss a better system for everyone, and that how it should be resourced and developed would need to be considered.

Liz Cameron asked whether there was appetite for earlier changes to the system as in her view ratepayers cannot wait years for an evaluation of the Barclay reforms. The Minister advised that non-domestic rates should not be seen in isolation of other workstreams such as the upcoming Tax Advisory Group or the New Deal for Local Government. He noted that the Barclay reforms need to be given time to bed in, to allow evidence to be gathered assessing how well they are working.

Any other business

The Minister noted that the next meeting of the sub-group would take place on 20 June 2023 and would be hybrid. Members were asked to confirm with officials whether they would attend the next meeting in person.

He advised that a draft report would be shared with the group ahead of it feeding in to the wider New Deal for Business Group. He also stated that the meeting on 20 June would provide an opportunity to agree how the group continues engagement beyond the New Deal for Business timescales.